Amidst the cool confidence of the Indian professionals and businesses, India’s economy and outlook seems to have taken a nosedive. By most signs, India Shinning is become India Suffering!
In November, a Firstpost article had asked the question “Is Manmohan taking us back to 1991 external mess?” The question seemed to have popped out of nowhere. On hindsight it seems, it was a very timely question.
Basically it argued that the Current account deficit was huge and likely to be covered by Capital Inflows, which were not loyal or long term.
The reason: with the rupee tanking against the dollar (over Rs 51 at last count), and with FIIs not investing in equity, debt is the only option left to bridge the gap in capital flows created by our high import bills. Our current account deficit (CAD), the gap between our external incomes and inflows and our expenditures and payments to foreign parties, is now upwards of 3 percent of GDP – and this gap can only be bridged by capital inflows in the short run.
If the deficit crisis looming on India is a reality, then the fall in India’s growth to between 5-6% is an even worse news. The roller coster may be on its way down.
Recently, S&P has revised India’s outlook to be negative, and is suggesting that India is facing a downgrade. The culprits of this possibility are the familiar villains.
“The outlook revision reflects our view of at least a one-in-three likelihood of a downgrade if the external position continues to deteriorate, growth prospects diminish, or progress on fiscal reforms remains slow in a weakened political setting,” said Standard & Poor’s credit analyst Takahira Ogawa (emphasis added)
In this scenario, the new Gallup poll suggests that Indians have a bad outlook as well of their lives.
The Wellbeing in India – when asked how they rate their current and future lives on a ladder scale with steps numbered from 0 to 10 based on the Cantril Self-Anchoring Striving Scale – and classify their state as thriving, struggling or Suffering – seems to be predominantly Suffering + Struggling.
The political leaders in the Government don’t seem to be getting the writing on the wall. They are in the usual mode of deception and fabrications.
Reacting to the S&P’s revision of India’s economic outlook to negative, Finance Minister Pranab Mukherjee on Wednesday said that there was no need to panic.
Admitting that delays in the process of legislations related to financial sector reforms may be a possible reason for such an outlook by S&P, the Finance Minister showed confidence in the Indian economy. Mukherjee said that he was sure that the Indian economy will grow at a 7% rate and that the fiscal deficit would be contained at the estimated figure.
Interesting to know that despite all the troubling signs that everyone is seeing – including the common man – the Government chooses to turn a blind eye and keep feeding useless rhetoric. It is now the considered view of many – except of course, the smart aleks of Indian Cabinet and Secretaries – that India’s growth will totter at 5-6% for some years now.
It could be worse.